Corporate liquidations;

Page 1

Corporate Liquidations
BY CHARLES N. WHITEHEAD Partner, Seattle Office
Presented at the Western Regional Conference of the Controllers Institute of America, Seattle—June 1958
IN the latter part of 1956 the Ways and Means Committee of the House of Representatives appointed an advisory group of outstand­ing
tax lawyers, accountants, and others to review the entire subject of corporate distributions, liquidations, and reorganizations. This appointment was part of a program by the Ways and Means Commit­tee
to review many facets of the Internal Revenue Code. Correspond­ing
groups were appointed to review partnerships, estates and trusts, and the administration of the Code in general.
My subject today is the report rendered to the Ways and Means Committee by the group on corporate distributions and adjustments (Subchapter C of the Code). This report was rendered December 24, 1957, and many of its recommendations are highly technical and would not be of general interest to this group. Moreover, the report covers the entire subject and would require extended comment if complete coverage were attempted. What I propose to cover basically are the recommendations on corporate liquidations, with brief comments on other matters.
It should be recognized that the report is only in the nature of a suggestion, but since the group as constituted represents some of the outstanding tax lawyers in the country, its recommendations may well have considerable impact upon congressional thinking. A careful review of the contents of the report therefore will provide some indica­tion
of current trends and thinking with reference to corporate tax problems.
Perhaps the most interesting recommendations of the group are those regarding corporate liquidations and the accompanying basis problems. Of course, these must be considered with provisions relating to collapsible corporations. Corporate liquidations may affect many types of taxpayers: individuals, corporate taxpayers, and wholly owned subsidiaries. The report covers all of these different types of liquidations, which will be discussed separately.
As you all know, taxable corporate liquidations under the present Code generally treat as capital gain transactions the difference between the assets received and the cost basis of the stock. In addition to the
271